Greencore confident in outlook after third quarter

The FTSE 250 firm said that on a pro forma basis, revenue increased by 8.1% in the quarter.

For the year-to date, revenue growth was 14% on a reported basis to £1.88bn, or 8.0% on a pro forma basis.

Looking at its divisions, Greencore said convenience foods UK and Ireland reported revenue of £375.9m in the third quarter - an increase of 1.4% on a reported basis and a 7.8% increase on a pro forma basis.

It said growth in the quarter was driven by the ‘Food to Go’ business, where reported revenue increased by 10.7% and pro forma revenue increased by 10.5%.

Growth in Food to Go was primarily driven by an increased revenue contribution from the distribution of third-party products through the company’s direct-to-store network.

There was reportedly some modest improvement in the rate of underlying category growth compared to second quarter levels.

Reported revenue in the other parts of the division decreased by 12.8% in the third quarter, reflecting the elimination of cakes and desserts revenue.

On a pro forma basis, revenue increased by 2.5%.

“The group continued to optimise its UK business portfolio,” the Greencore board said in its statement.

“The phased closure of the desserts manufacturing facility in Evercreech was completed in June and the site was subsequently divested.

“In addition, as part of the strategy to transition part of its ready meals portfolio to fresher ready meal propositions, the group is proposing to phase out longer life ready meals manufacturing at Kiveton - where it will continue to manufacture quiche and soup - and transfer volume to other parts of its ready meal network.”

Greencore said the proposal required employee consultation and, if agreed, the proposed closure of the ready meal unit would occur in March 2019, incurring modest cash costs.

In its US convenience foods division, Greencore said reported third quarter revenue was £263.7m, a decrease of 0.8%, but an increase of 8.6% on a pro forma basis.

It said that strong pro forma revenue growth was driven by the former Peacock Foods business, where proforma growth accelerated to 19.4%, with a broadly similar level of volume growth.

The volume growth reportedly reflected good underlying category growth, and the impact of new business.

Pro forma revenue in the original part of the US business decreased by 25.2% due to previously announced volume declines.

“New business development continues to progress well,” Greencore said of the division.

“In the third quarter, several new product launches were successfully executed.

“In addition, future growth opportunities with key branded food partner customers are progressing to plan.”

As it anticipated, Greencore said the scale of capital investment spending across the group normalised in the quarter.

The board said it anticipated cash generation and returns to continue to improve through the second half of 2018 and beyond.

“The group continues to progress its refined US strategy to focus on the large and structurally growing branded food partner channel.

“The group has strengthened its US leadership team with the appointment of Anton Vincent who joined the group as the CEO of Greencore USA in July.

“Anton has more than 20 years' experience as a senior executive at General Mills, most recently as president of the snacks division.”

In the UK, Greencore said it was continuing to strengthen its commercial relationships, implement initiatives to drive profit progression and streamline its leadership structures.

To build on that momentum, Peter Haden - currently group chief operating officer - was appointed to the newly-created role of CEO of Greencore UK, effective October.

“The group anticipates good pro forma revenue growth in the final quarter of the financial year,” the board said of its outlook.

“The group reiterates its full year 2018 guidance of adjusted earnings per share in the range of 14.7p to 15.7p.

“The improving outlook for underlying cash generation and returns remains unchanged.”

Greencore said it would report its full-year 2018 results on 4 December.